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Getting Ready For A New Car!

Time For A New Car?

Several years ago when I was broken down on the side of the interstate in my 92 Jeep Cherokee I thought to myself “My next car is going to be brand new so I don’t have to deal with this gain!”  I knew that I would need to finance as I was just a twenty something with a low end painting job, but I was hopeful that I would be approved. I was quite ambitious for a boy with little to no credit reported or open trade lines.

Fast forward to later that evening; I sat in the Nissan dealership for hours, hoping one lender would overlook my credit score and provide me with anything! Spoiler: No lender would even consider me and my abysmal credit score. At that moment I knew that I would have to go about this a different way if I ever wanted to even be considered for financing and began my research over how exactly credit worked.

 

Understanding Your Credit

First off, I had to get a hold of my credit report and see just exactly what was going on. My credit adviser directed me to Free Credit Hub where I was able to sign up for credit monitoring and finally see what was dragging my credit! I was greeted with a cacophony of different numbers, phrases and names that filled the pages and made my stomach drop. My adviser walked me through each  line on the report and explained that there were multiple categories that made up the report. Those categories were:

1. Payment History-  35% of your credit score is based on your past bills and how they were paid.

2. Amounts Owed- 30% of your credit score is based on the available credit card limit you’re using and the amount you owe across your accounts.

3. Length of credit history – 15% of your credit score is determined by the credit history you have built. This is based on the average age of your accounts  along with a few other factors. The longer the history, the better the results!

4. Credit mix – 10% of your score is from the mix of revolving credit (credit cards) and installment credit (car loans, mortgages, etc.) you have.

5. New credit – 10% of your credit score comes from new credit accounts that you have established.

 

Time To Build!

Alright, now that I know what exactly makes up my credit, it is time to start building it up! I took 3 easy steps to start building positive credit and the foundation for a strong credit score.

  1. Lowering My Card Utilization– When I got my first credit card I was told to never use more than 50% of the allowed credit and I would be fine. If we look at our credit utilization like a grade card, a 50% utilization rate is a solid F. 30% is about a C rating and the lower you go the better your rating. Keeping your utilization under 10% is an A rating and is sure to build your credit the fastest.
  2. Becoming An Authorized User– Becoming an authorized user is by far one of the easiest ways to build credit and is kind of like passive income. If you are listed as an authorized user on a trusted family members card, their history is listed on your report as well and you don’t even have to use the card! Be sure you work with someone you trust because the negative history will be placed on your report as well.
  3. Pay Your Bills On Time-  Paying off those balances on time is extremely important when building credit as it provides positive credit history and establishes a exceptional trade line. Late payments are one of the largest discrepancies on most Americans credit report!

 

Your Car Loan Will Help Build Credit.

After about 6 months of building up my credit, I was able to acquire financing toward a new vehicle. You don’t need to have perfect credit to acquire a car loan, but it will affect your financing options and future payments. The wonderful thing about this loan is that it establishes another line of installment credit to your account. As long as you are making your payments on time, this installment credit will soon become a wonderful trade line that builds a long credit history. In the end it is all bout finding the right lender for you and managing a positive ascending credit score. If done correctly, you will be on the road that that fabled 800 credit score!

 

 

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.

MORTGAGE LENDING REFORM

4 Tips For Buying A House

Building Buying Power

 Have you been picturing the day when you can paint your own walls and mow your own grass? The dream of homeownership comes with great financial responsibility. Many first-time home buyers have questions about their down payment, and how they can start saving to make that first major purchase. We’ll discuss several organizations that are willing to help you with the financial burden and get you into your own home soon.

The process of applying for a loan can be overwhelming and stressful. Without an excess amount of funds, you may find yourself digging in couch cushions and trying to work extra hours to come up with the funds and savings to start the journey toward homeownership.

There are a few major factors that come into play when getting pre-qualified for a home loan.

  • Credit Scores
  • Income
  • Debt
  • Down payment

Paying Down Debts? │ Not Enough Left For A Down Payment?

If you have been trying to pay down debts or have been in the credit repair process, again, excess funds may be low. After your income has been reviewed by a trusted lender, more than likely you have discussed how much money you will need for a down payment. Did the amount of money sound manageable?

There are a few loan programs that require no down payment like USDA, which you have to meet strict income guidelines for. Another is the VA loan which is only available to eligible Veterans. Let’s say you won’t qualify for either of these, what happens next?

All hope is not lost! There may be help right around the corner, you just have to know where to look. Below is a list of some other options out there to possibly help jump-start the home buying process for you.  

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Down Payment Assistance Programs

For down payment assistance, there may be a household income limit or a limit on the purchase price. Look in your area where you are hoping to purchase. There are some cities will also contribute and help with down payment assistance. You can search on your City website where they may talk about things like how to get grant money or down payment assistance for first time home buyers!

Talk to your lender further about what programs they may know of in the area in order to help you with funds. If you are a first time home buyer, there may be a program for you! Hoping to buy a home in a historic district? There are grants for homes in certain areas of towns where they would like to see the homes restored and rehabbed too.

 

Habitat For Humanity

Habitat for Humanity occasionally partners with homes with income restrictions that are in need of an overhaul and some DIY. For this program, reach out to your local organization to learn about the qualifications and application process or visit their website https://www.habitat.org/

 

Community Land Trusts

Community Land Trusts are also nonprofits that are willing to make the buying process more affordable by selling just the building. There would be a lease on the land that you occupied. In an effort to strengthen and serve low-income families, these Community Land Trusts serve the community and work to create homes that are permanently affordable and last for generations.

 

Ready For Home Ownership?

Throughout the home buying process, there will be so many new things to learn as you become a homeowner.

A few things to start doing in order to take the next step in the process are:

Shop Around For The Best Mortgage

If you are ready to take on home ownership, start looking around at lenders in your area. Consider the pros and cons of a bank, credit union, online lender or mortgage broker.

Be extremely careful as you shop around that you don’t allow each institution to start pulling credit right away!

Apply

Your credit will be pulled at this point by the lender you are using. When you have decided on the best option you will need several documents like your paystub, recent bank statements and tax return documents. There will be many different types of documents that dive deep into your finances. Remember to hold off on applying for new credit, buying a new car or making large purchases before you close!

This can really hurt your credit scores and may cause an issue for your home purchase. If your lender cannot get you pre-approved with your credit scores they may refer you to a credit repair company so that you can work on your scores. Some credit repair companies work with you as quick as they can to get your scores up so you can get back to the lender as soon as possible!

Pre Approval

Once you complete the application, your lender will decide based on the documents you provided. At this point, the lender will let you know how much they are willing to loan. This document is typically good for 60-90 days.

Start Shopping!

Now is the time to grab your agent and start checking out all the open houses and find your dream home!

Make An Offer

Once you find the house you are looking for, your agent will write a contract up and have you sign the purchase agreement.

As you move forward with your home purchase there will be loads of paperwork and numbers thrown at you. Your lender will be your guide throughout the process and will keep you updated on documents they need in order to get your file closed on time. Talk with friends, your agent, and family about lenders they have used. The home buying process is one that can be stressful, but with the right guide, it can be exciting too!

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